You are on page 1of 44

8661 JjKpdfi f!

|oSuoiv

^

A
Contents

Preface

PART ONE
The Year that Was - 1997

PART TWO
The Year So Far-1998 10

PART TRHEE
Politics, Economy and Society 18

Political Changes 18
Major Legislation 21

The Economy - Inflation 22
Exchange Rate 25
Monetary and Banking Developments 25
Foreign Aid and Investment 26
Fiscal Situation 28
- Industrial and Real Sector Development 29
- Constuction Sector 29
- Gross Industrial Production 30
- Mining 30
- Service Sector Development 30
- Foreign Trade Development 31
- Agriculture 33
Livestock 33
Crops 33
- Privatisation 34
Contents

• Impact of Asian Crisis on Mongolia's Economy 22
• Impact of Russian Crisis on Mongolia's Economy 24
• Reconstruction Bank- Golomt Bank Merger 27
• Erdenet Plant Director Dilemma 32

Social Issues 35
Unemployment 35
Poverty 36

PART FOUR
Partnership for Progress Update 37

Human Development 38
Environment and Natural Resource Management 39
Governance and Economic Transition 41
HIV/AIDS/STDs 43

Mongolia Update 1998
Preface

M ongolia Update has proven to be one of the
more popular documents produced by the
UNDP Mongolia office. Since the autumn of 1997
UNDP has been able to offer two more frequently
u p d a t e d sources of i n f o r m a t i o n : the U N D P
homepage and our monthly newsletter, the Blue Sky
Bulletin (available from our office if you are not al-
ready receiving it). Please use the United Nations
Homepage at http://www.un-mongolia.mn to keep
abreast of the latest political, economic and social
developments in Mongolia. Mongolia Update is an
unofficial document of UNDP and is designed to pe-
riodically keep our partners outside Ulaanbaatar
apprised of issues in the country. We take respon-
sibility for any shortcomings or oversights and wel-
come feedback from users of this report.
The Year that Was-1997
One

M mgolia began to turn the corner in 1997 as market
eforms started to bear fruit. During the turbulent transi-
tion period of the early 1990s, Mongolians witnessed soaring
inflation and a generally weak economy. This was the result of the
transition period following the collapse of the Soviet Union and
the end to subsidies and trading arrangements of that era. With
the election of Mongolia's first non-communist government in
June 1996, the Democratic Union Coalition used its strong
mandate to press ahead with accelerated market reforms while
building on the foundation put in place by the reformed commu-
nists prior to 1996.

The new government's action programme was founded on funda-
mental economic reform, including privatisation of major
industrial enterprises and state-owned banks, liberalisation of
prices and the abolition of tariffs.

According to the government of Mongolia the main objectives of
Mongolia's economic and social development in 1997 were
fulfilled. In 1997 the most obvious successes were in the macro-
economic realm and in the emerging service sector. Inflation in
1997 was decreased first by 35 per cent and then by 17 per cent (it
had reached 300 percent during the 1990s) with a 31.1 percent
rise in economic growth . The GDP increased by 3.3 per cent
against that of 1996. A budding service sector was already
beginning to show its face on the streets of Ulaanbaatar. New
shops, restaurants and bars were not just catering to the well-
heeled foreign community but to the growing number of Mongo-
lians with disposable income and an appetite for consumables.
The number and quality of vehicles on the roads was also

Mongolia Update 1998
The Year that Was-1997

evidence of a consumer boom after years of pent up demand
(there were 65 020 registered vehicles in 1996 and 70 088 in
1997)..

The 1997 state budget revenue of Mongolia totalled Tg 227.6
billion and state budget expenditures reached Tg 289 billion.
Expenditures exceeded income by Tg 70.4 billion. Industrial
production increased by 4.4 per cent against 1996. A source of
pride for a traditionally nomadic country, the livestock population
reached a historic high in 1997 with 31.3 million heads, up 2
million from 1996.

Privatization of state entities continued apace in 1997 with
apartments being sold by the state to occupants; in a surprise
move the government decided to give away apartments for free to
those who had lived in them prior to October 1996. The State
Property Committee's goal for 1998 is to finish privatization of
all small state entities which now total 500.

Oil Prospects Brighten
Prospects for increasing government revenues from oil extraction
brightened in 1997. On June 6 in Dornod aimag 700 barrels of
high quality petroleum were extracted from a 2 400 meter well.
Four wells out of the six tapped had petroleum and it is believed
that the region will have an abundant reserve for several years.
Estimates by a Swiss bank and the American Soco Company place
the deposit at 15 million barrels of high quality oil with the
potential to deliver 700 barrels per day. Twenty wells are
expected to be drilled up by 1999.

Flash floods killed 13 people and over 5 000 animals, and
destroyed over 13 dwellings in Galuut, Bayan-Ovoo and Ulziit
sums of Bayankhongor aimag on June 23. The total damage was
estimated to be Tg 164.2 million. The MIAT Yu-12 plane crash in
the spring(???) in Dundgobi, killed eight and seriously injured
four people.

Despite some improvements in the economy, high levels of
unemployment and consequently, a perceptible increase in poverty
The Year that Was-1997

( not to mention a slow economic recovery outside the capital)
took its toll on the political realm. Support for the opposition
MPRP remained strong and cracks were beginning to appear in
the Coalition government.

In the political arena, MPRP candidate for the presidential office,
N. Bagabandi, received 60.8 per cent of the vote in a May 18
election, in a campaign stressing social |ustice. International
observers called the election free and just and on June 20 the
newly elected President of Mongolia took office. At the start of
the academic year in September, students from state-owned
colleges and universities, led by the Mongolian Students' Union,
went on strike. They demanded a reversal of tuition fee and
dormitory charge hikes. After meeting with student leaders, the
government acceded to their demands, instructing university
directors to cut fees and slash dormitory rents. But with no
commitment of extra money from the government, university
administrators warned cuts would have to be made in other areas,
including supplies and instructors' salaries. It was the first-ever
attempt by public university students to go on strike.

MPRP Clash with Coalition
With the opening of Parliament on October 1 the government was
challenged by a more confident opposition led by the MPRP,
newly invigorated by the election of its candidate for President.
The leader of the MPRP, N.Enkhbayar, took office and chose the
opening session of Parliament to call for the government's
resignation. He accused the Coalition of ignoring its election
promise to cut taxes by 20 to 30 per cent, of bungling
privatisation and neglecting the social sphere. Finally, on October
17 the government marshalled its majority in a secret ballot to
defeat the resolution, with 47 MPs voting against and 25 for.
Prime Minister M. Enkhsaikhan used the occasion to defend his
government's record, noting that inflation had been decreased, the
tugrug stabilized, foreign currency reserves increased and a
banking crisis deflected.

A mayoral decree issued in July called for all Ulaanbaatar
residents between the ages of 15 to 40 years to undergo

Mongolia Update 1998
The Year that Was-1997

compulsory testing for HIV/AIDS and other Sexually Transmitted
Diseases (STDs) during a campaign slated for the first two weeks
of October. The supervisor in charge of the city's health office,
Mr. Y. Terbish, then said that only females in this "high-risk" age
group were to be tested. Finally, the Ministry of Health
ascertained that the campaign was to be carried out in all aimags
and non compulsory.

According to the STD/AIDS Prevention Center director Mr.
H.Davaajav, about 84 per cent of the Ulaanbaatar population
between the ages of 15 to 40 underwent voluntary testing; 1,036
were infected with STDs, whereas 300 tested negative for HIV.

Prime Minsiter M. Enkhsaikhan was forced to call an emergency
Cabinet meeting in December when it was discovered that one of
two men from Cameroon - previously arrested for fraud - had
tested positive for HIV, gonorrhoea and trichomonas while in
prison. The two men became a media cause celebre, and were
later deported from Mongolia. A police investigation revealed
that the two men had had sexual relations with four Ulaanhaatar
sex workers, who in turn had sex with 56 Mongolian men. One of
the women tested positive for HIVs, making her's the second
known case in Mongolia. The first HIV case to be identified in
Mongolia was reported in 1992.
The Year So Far-1998
Two

January 1998
* The new year brought more than just hangovers for Mongo-
lians; it also brought a shorter work week. Since the early days
of communism Mongolians had grown used to a six-day work
week. This changed when the Parliament amended the labour law
to switch to a five-day work week as of January 1. Despite
prophecies of doom from some quarters, the transition to a
shorter work week passed quietly. Though compulsory holiday
time was shortened to 14 days from three weeks, wages stayed the
same. According to a Parliament poll, 72 per cent of the
population supported the change.

* The government's Year of Youth also kicked off the new year
with its own song sung by Mongolia's top pop musicians. Tg 150
million will be spent on activities planned for the year, including
concerts and a summer youth forum. According to the State
Statistical Office, 64 per cent of the population is between the
ages of 16 and 35. Youth have been hit hard by the economic
changes, with 62.5 per cent of the unemployed under 35. Second-
ary and higher education enrolment reached 116,300, with 57.6
per cent female and 42.4 male.

* The Ministry of Health and Social Welfare and the Young
Leaders' Club jointly established the National Foundation Against
AIDS. The Foundation will organize peer counselling, testing and
advice for young couples.

Mongolia Update 1998
The Year So Far-1998

* The Mongolian Nature Protection Association has become an
official member of the International Confederation of World
Nature Protection Associations.

* Mongolia's livestock population topped 31.3 million heads
according to the SSO. This broke down into 355,100 camels, 2.9
million horses, 3.6 million cows, 14.1 million sheep and 10.3
million goats. The decline in the camel population in 14 aimags is
ofconcern.

* The Democratic Coalition defended its record to date,
claiming it had fulfilled one third of its Contract with the Voters.
Since being elected in 1996, the government had passed 189 laws,
rescinded 13 and issued 183 decrees.

* A Cameroonian national infected with AIDS was deported
from Mongolia on January 7.

February 1998

* Satoma-Oil, a Mongolian and American Joint Venture,
exported its first batch of 350 barrels of oil extracted from a field
in Tamsag, Dornod to China.

* The Government's "Green Revolution" kicks off, with the
intention to dramatically increase the quantity of fruits and
vegetables grown in Mongolia and to reduce dependence on
foreign imports.

» The Youth-21 Ecoforum on Sustainable Development was
organized by MAP-21, the Mongolian Youth Association and other
NGOs.

» The Erdenet copper mine board decides to extend director
general, Sh.Otgonbileg's term by three months until May 25.

* An agreement between the Mongolian and South Korean
governments allows 500 Mongolians to work in Korea for a two-
year stint.

HL_
The Year So Far-1998

« The Buyant-Ukhaa airport in Ulaanhaatar, thanks to the Asian
Development Bank, now has two fire trucks where it had none
before.

» Canada opened its first diplomatic mission in Mongolia and
plans are underway to open a Mongolian consulate in Canada's
financial capital, Toronto. The Canada Fund is spending US
$ 100,000 on projects in Mongolia and 10 Canadian mining
companies are employing 500 Mongolians.

« Workers at Mongolia's largest industrial enterprise - Erdenet
copper mine - walk off the job on February 23. The dispute
erupted over rival candidates for membership of the board
controlling the Mongolian-Russian joint venture. Erdenet accounts
for one fourth of Mongolia's state budget and 50 per cent of its
exports.

March 1998
* President N.Bagabandi makes an official visit to Kazakhstan,
Kuwait and Turkey with an entourage of 20 people, including high-
ranking officials and businessmen.

* Mongolian United Movement members, with their head
G.Boshigt, started a sit-in at Sukhbaatar Square, blaming the
Parliament and government for betraying promises made to the
people.

» Three infants die and dozens of others are seriously ill due to
the spread of sepsis at Maternity Ward No. 1. An estimated 40
babies are being treated for the disease.

* It is announced by the National TB Centre that Mongolia has
one of the world's highest rates of tuberculosis infection. In 1995
Mongolia had 124.9 TB infections per 100,000 people - the fifth
highest level in the world. To date 98.2 per cent of the country's
3,600 TB patients are receiving treatment in hospital.
2

M o n g o l i a U p d a t e 1998
The Year So Far-1998

April 1998

* The government formed by Prime Minister M.Enkhsaihan
resigns. Ts. Elbegdorj, the leader of the Democratic Union
Coalition (Mongolian National Democratic Party and the
Mongolian Social Democratic Party) and Parliamentary deputy
speaker, takes over as Prime Minister of Mongolia.

« A Federation of Mongolian Trade Unions demonstration called
for better wages, benefits, vacations and an improved social
welfare policy. The demonstration arose from the Parliament's
decision to postpone allowances and benefits issued from the
social insurance and social welfare fund. The on-going demonstra-
tions by the Mongolian United Movement, led by G. Boshigt,
remained defiant. They demanded a response from the President,
Parliament and the Government to their 23-point petition.

» Severe storms in the western aimags killed two people, 43,500
animals, destroyed 1,200 dwellings and buildings and several
electronic stakes. Total damages were estimated at Tg 1.4 billion.

» Over 100 guns capable of firing rubber bullets were distributed
to environmental control officers across Mongolia. Poaching and
illegal logging are on the rise, as well as assaults on park staff.

4 The number of Mongolians donating blood declined dramati-
cally in the first quarter of 1998. Officials pin the plunge down to
increased fears of HIV infection in the wake of several highly
publicized cases.

* Health organizations won the right to make money after
members of the State Ikh Hural social policy standing committee
voted against adding the words "non-profit" to the definition of
health organizations in the proposed health law.

May 1998

» US Secretary of State, Madeleine Albright paid a seven-hour
visit to Mongolia on May 2 and praised the country as being

EL.
The Year So Far -1998

"independent and peaceful, proud and free." She noted that trade
doubled with the US in 1997 - but at US $50.9 million it still
lagged behind Russia, China and Switzerland.

* President N.Bagabandi made an official visit to Japan from
May 13-18 through the invitation of the Japanese government.

» Newly-appointed Minister of Finance, B.Batbayar, adopts
resolution 80 on May 27, merging the bankrupt state-owned
Reconstruction Bank with the private Golomt Bank.

* In the same week that MIAT, the national airline, celebrated
its 73rf anniversary with the introduction of an Airbus 300 to its
fleet, a Chinese-built Yu-12 plane crashed killing all aboard.
Twenty-eight crew and passengers perished, including 16 adults,
seven children and five teenagers. The Yu-12 has a poor safety
record in Mongolia but no cause has yet been determined for the
crash. An investigation continues.

* Spring fires continued to burn across many parts of Mongolia,
though officials say most of the blazes were extinguished. So tar
in 1998, 91 steppe and forest fires have been reported in 12
airnags.

» Mongol TV began night broadcasts on May 2, extending its
evening broadcasting schedule until 1 a.m. The late-night lineup
begins with the 11 o'clock news and features sports and entertain-
ment programming between midnight and 1 a.m, including a
popular Disco TV show.

« Mongol Telecom (MONTEL) reported profits of Tg 3.6 billion
in 1997, two-and-a-half times the previous year's level. The state-
run company is 40 per cent owned by Korea Telecom.

« The government allocated Tg 410 million (US $512,000) from
the central budget to repair the damage caused by wind and dust
storms in the western aimags. Total damages were estimated at
Tg 1.4 billion (US $1.7 million). The spring storms in which
winds reached 162 kilometres per hour, claimed the lives of two
people and 43,500 livestock and levelled 1,200 gers.

EEL. Mongolia Update 1998
The Year So Far-1998

* Anti-government protestors blocked downtown roads in
Ulaanbaatar on May 19. The protest was organized by the
Mongolian United Movement and consisted mainly of pensioners
demanding the resignation of the government. MUM is facing a
lawsuit by the city for obstructing traffic.

June 1998
* MI AT general director, Ch. Alexander, stepped down on June
5 along with G. Ganbaatar of the Civil Aviation Authority, in the
wake of the May plane crash. Alexander was replaced by former
Infrastructure Minister, G. Nyamdavaa.

» An International Investors Forum on Agro-Industry and
Tourism took place during June 24-26, involving over 200 foreign
and 500 domestic representatives.

« Parliament was paralyzed by a two-day debate and a subse-
quent vvalk-out by the opposition over charges that resolution 80 on
the bank merger was illegal.

* Over 13 000 firearms were legally imported into Mongolia
between 1995 and June 1998, pushing up the total of firearms to
45000.

July 1998
» MPRP candidate, D.Tseveenjav, wins a by-election with 70.8
per cent of the vote. It is the third by-election in a row the MPRP
has won since the general election two years ago.

« The newly appointed Government resigned on July 25 after a
secret poll; 42 members or 56 per cent voted for the government
resignation and 33 against.

» As part of a scheme to fight desertification in the Gobi desert
border town of Zamyn-Uud, the Ministry of Environment plans to
spend Tg 80 million (US $100,000) to transport sand dunes five
kilometres outside the city.
The Year So Far-1998

* Long-awaited new ID cards for Mongolians were delayed until
the government transferred funds to the British company making
the cards. The new ID cards are to replace passports and will re-
introduce Mongol family names in addition to given and paternal
names.

* A US $30 million World Bank project will tackle electricity
waste in the capital. According to the head of the power authority,
Mr. Erdenbileg, 13 -14 per cent is squandered because of poor
technology and another 30 per cent is pilfered by consumers.

» Heavy rains and flooding across the country claimed 12 lives
and provided a stark contrast to the drought-like conditions that
started the summer.

August 1998
» President Bagabandi intervenes in a two-week-long hunger
strike by the Mongolian United Youth Movement, calling for it to
end and the protestors to use legal channels. Under an agreement
with acting Prime Minister, Ts. Elbegdorj, the protest stopped
with a pledge from the government to pay more attention to social
policy.

* A private members' bill in the Parliament calls for a 15 per
cent tariff on all imported foodstuffs between September 1 and
April 1. The bill hopes to protect the domestic food industry.

» An amendment to the education law makes it compulsory for
Mongolian children to start school at age six. Mongolians
currently begin first grade at age eight, one of the highest school-
starting ages in the world.

« The power authority announces it will cut electricity supplies
to recalcitrant debtors starting August 15. The Authority said it
had no choice, stating repairs and winter preparations had stopped
and that a debt of US $14 million was still outstanding. 70 per
cent of power users in Darkhan, Baganuur, Erdenet and the ger
istricts of Ulaanbaatar experienced cut-offs.

Mongolia U p d a t e 1998
The Year So Far -1998

» A disabled man sets himself alight on August 13 during a
demonstration in Freedom Square. Ts. Jambal doused himself in
petrol and ignited it. He suffered bums to his legs and said he
could not survive on Tg 6,420 a month while supporting a wife
and three children.

September 1998 '
» The media landscape is set for a major shake-up with the
passing of the long-awaited media law on August 28. The state-
owned newspapers Zasgyn Gazrin Medee and Ardyn Erkh -
Mongolia's most widely read paper - are to be abolished under
the law. The law, designed to promote democracy and pluralism in
society, bans state ownership and state control of the media.
Newspapers and radio stations supported by local governors will
also be affected as well as the giant national broadcaster Mongol
TV and Radio. The law will take effect on January 1, 1999.

» Mongolian Traditional United Party MP, O. Dashbalbar, has
suggested that debt evaders be strung from a pole. "Let's execute
them if necessary," he said to Parliament.

» The national oil-import company, NIC hiked prices by 12.5 per
cent starting September 2.

» Over 30 agencies, studios and publishers have joined the newly
formed Mongolian Advertising Association. The advocacy group
chose Foreign Investment Board chief, D. Jargalsaikhan, as its
first president.

» Mongolia will have an open market with regards to both
Internet providers and cellular phones as of January 1, 1999. The
Mobicom cell phone company will lose its monopoly status, as
well as, the Datacom Internet provider.

October 1998

« Sanjaasuren Zorig, the democracy campaigner turned
politician, was murdered upon his return to his apartment on
October 2.

EL.
Politics, Economy and Society

Three

Political Changes
By the middle of January the Parliament approved elected MPs
being members of the Cabinet; a move that was to have profound
significance for the Enksaikhan government in the months to
come. The Mongolian 1992 constitution prohibited members of
the State Ikh Hural from taking on other state duties. An
amendment to the law on MPs' legal status adopted earlier by this
Parliament interprets the edict to mean that - unlike in most
parliamentary democracies - MPs cannot serve in the Cabinet.

In February the leaders of the governing coalition partners - the
National Democratic Party and the Mongolian Social Democratic
Party - appealed for a merger. Opinion varied widely on the
reason for the proposed merger, with some seeing it as a sign of
political crisis while others see it more like a natural evolution
for two parties with similar ideologies. The Social Democrats
were also being wooed by the opposition Mongolian People's
Revolutionary Party to form powerful centre-left bloc. Rumours
were also starting about a Russian-style overhaul of the Cabinet.

In a bizarre move on March 27, the general council of the
Mongolian National Democratic Party voted for the resignation of
its government. The suggestion came from party president and
Deputy Speaker, Ts. Elbegdorj, soon to supercede Prime
Minister, Enkhsaikhan. At the time, Elbegdorj suggested that the
Coalition government's current low public approval came down to
a lack of coordination between the government and the State Ikh
Hural. "The government has not acted in line with the wishes of
the Parliament and should resign," he said at the time. Parliament

Mongolia U p d a t e 1998
Politics, Economy and Society

resumed on April 6 after a two-and-half month break during which
fissures in the Coalition appeared. Prime Minister, Enkhsaikhan,
complained that a faction in the party was trying to oust him. He
was right. On April 17, a day after an extraordinary joint meeting
of the ruling councils of the MNDP and MSDP, Prime Minister,
Enkhsaikhan, handed his resignation to President, N. Bagabandi.
It was approved by the State Ikh Hural on April 22 by a vote of
591. Ten MPs boycotted the session, saying the move was unconsti-
tutional.

The resignation provoked mixed reactions amongst Mongolians.
Some felt it would speed up the pace of reform. Others saw it as a
grab for power by a faction in the Coalition, or worried about the
lack of experience of a Cabinet of MPs.

Youngest PM
The new Prime Minister, Ts. Elbegdorj, took office on April 23,
vowing to chart the same economic course as his predecessor, and
to operate a more open and transparent government. Although he
replaced a number of senior civil servants, he said he would not
make changes to the structure of the nine government Ministries.

He vowed to press forward with a busy spring session, in which a
number of bills central to the government's programme —
including a new law on foreign investment and a long-awaited
media law — were slated to be passed.

But he immediately ran into trouble. Elbegdorj nominated his
nine-member Cabinet April 27, but only five of the nominees
received the approval of Parliament. The process came to border
on farce, as nominee after nominee was shot down in the State Ikh
Hural. The last Minister— Education Minister Ch. Saikhanbileg
— was not approved until May 28. He was the fifth nominee put
forward for the post. The local media expressed concern about the
average age of 35.8. In place at last, some people began to worry
about its lack of experience.

Then, at the beginning of June, the 25 Opposition MPs began a
boycott in protest over the government-approved merger of the 18-
month-old state-owned Sergeen Bosgoltyn (Reconstruction) Bank
Politics, Economy and Society

with the private Golomt Bank. The merger, which the government
carried out with the backing of international financial institutions,
was necessary, said the Finance Minister. The Reconstruction
Bank was insolvent, with 70 percent of its Tg 11.2 billion (U.S.
$13.7 million) in outstanding loans classed as unreliable.

The Opposition labelled the merger a "conspiracy", charging the
government with driving the bank to its doom by racking up Tg 8.7
billion ($10.5 million) in debts and pointing to links between the
Golomt Bank and members of the National Democratic Party.

The result was a Parliament paralysed for all of June. Key bills
— including the foreign investment bill slated to be approved
before a June 24-26 investors' conference in Ulaanbaatar —
languished.

Government Minister Murdered
The crisis deepened when a large majority of an all-party task
force appointed to investigate the merger, ruled that the move was
improper. The President warned that if the impasse was not
resolved soon, he would have no choice but to dissolve the State
Ikh Hural and call an early election.

"Even if the government resigns or there is a new election, it will
not mean that Mongolia will reverse its chosen path," Prime
Minister, Elbegdorj, told journalists on June 18. "The people have
already made their choice."

On July 25 Prime Minister, Ts. Elbegdorj, and his entire cabinet
resigned after a secret poll, with 56 per cent of MPs voting for
the Government's resignation. On October 2, one of the founders
of the democratic movement and acting minister for infrastructure
development, S. Zorig, was murdered on returning to his
apartment. At the time of writing the Parliament was still
searching for a replacement Prime Minister to form a new
governmen, and Zorig was hinted at being a contender.

The opposition MPRP further distanced itself from the past by
adopting in May a new logo. Replacing the traditional communist
red star with a red rose - the international emblem of social
democracy - and a yin-yang symbol, expressing the creative and
receptive forces of nature. The party also passed a resolution
expressing "deep regret" for the "tragic" purges of the 1930s and
Os, in which as many as 30,000 Mongolians died.

Mongolia Update 1998
Roftics, Economy and Society

\1ajor Legislation

The autumn session of the Parliament came to a close on January
23, 1998. It was a busy session with 91 laws adopted out of a total
172 draft laws and 60 resolutions. Thirty new laws were adopted,
52 were amendments to existing laws, and eight invalidated old
laws. They included issues relating to social problems, reforms to
social policy, a law on the five-day work week and legislation
defining the minimum subsistence level and the minimum wage.
The 1998 spring session started on April 5 and planned to adopt 43
draft laws. By July 1, nine laws were drafted, four were amended
and one invalidated an old law. The legislative agenda was slowed
down by the change in prime ministers, and the on-going political
crisis surrounding controversies like the much-criticized Golomt
and Reconstruction Bank merger.

The priorities for 1998 include health care, medications, hygiene
and sanitation, science and technology, national security and
mobilization. According to the plan, the following draft laws will
be debated: state budget, administration and financing of state
organizations, mass media and freedom of information, elections
and lobbying.

In late January, the Prevention of Crime law went into effect. It
prohibits the media from publishing details of crimes and crimi-
nal trials. Supporters of the law say the plethora of newspapers
and TV programmes reporting on crime are actually encouraging
it. Critics of the law claimed it was a step backwards to state
censorship and that out of sight does not necessarily mean out of
mind.

In September, the Media Law was passed. It removes the state
from any involvement in the media as of January 1, 1999. This
affects newspapers and the leviathan state broadcaster, Mongol
TV and Radio

BL
Politics, Economy and Society

The Economy - Inflation
Macro economic indicators showed some very encouraging results
in 1997. The State Statistics Office showed inflation dropping
from over 300 per cent only several years ago, to 17.5 per cent
for the year. According to former Minister of Finance, P.Tsagaan,
'The liberalization of prices, the abolition of import taxes, a deep
restructuring process in the banking and financial sector, changes
to the tax system and a strict credit policy conditioned the
decrease of inflation down to 17.5 per cent per annum. The GDP
increased by 3.3 percent per annum.' Others attributed the
lowering inflation rate to the reduced purchasing power of the
population.

By July 1998, inflation had dropped below ten per cent for the
first time since Mongolia's transition to a market economy,

(fltsmirG^

|,;!^<H||^4|i$Jii|g||a;U||^tii,r. • 1t w as:] > rejectedto 'genera|i|
:||$|j![|^ 1.2 billion J)yjuji||
' |fi|3 |ns|£i|n|n$pc^ only Tg:||y||
iiiiiittllilt«r|itf owfllitoig

s- fesultin" Iroirt d

early aqua n

oil

Mongolia Update 1998
Politics, Economy and Society

according to the SSO. This was attributed to a tough monetary
policy and limits on credits to banks and the government.

The consumer price index (CPI) increased for housing, fuel and
electricity by 50.7 per cent, clean water per capita by two-fold,
goods and services and education by 41.4 per cent, clothes, shoes
and cotton materials by 30.5 per cent and medicine, vaccines and
medical services by 26.6 per cent.

Commodities and servbices, End of 1996 End of 1997 Mune1998%
Measuring unit MNT MNT End of 1997

General Index - - 109.2%
1. Foodstuff
Flour (grade 1 , kg) 325.0 365.0 86.3%
Bread ("Atar", piece) 240.0 230.0 100%,
Rice (kg) 390.0 360.0 100%
Mutton (grade 1 , kg) 550.0 595.0 181.5%
Beef (grade 1 , kg) 650.0 650.0 164.6%
Milk (litre) 350.0 450.0 65.3%
Sugar (kg) 526.0 555.0 84.5%
Potato (kg) 295.0 255.0 135.7%
Onion (kg) 450.0 590.0 159.3%
Vegetable oil 1620.0 1400.0 98.6%
Eggs (piece) 117.0 125.0 100%
Alcohol (domestic, 0.51) 1920.0 2500.0 95.8%

II. housing, heating and
Electricity
MontHy housing space fees 80.0
(1sq.m)
Monthly heating fees (1sq.m) 48.0
MontHy water use per capita 180.0
Electricity (1 Kilo Watt) 18.2 35.2 100%
Bus fare 100.0 100.0 100%

Source: State Statistical Office report.
'Comparing June 1998 with the end of 1997. The differeuce is shown in percentages.

9.2 per cent; for 1997 it was 28.9 per cent. In March of 1998, due
to meat price increases of between 30 and 40 per cent, the CPI
grew by 4.2 per cent compared with February 1998.
Politics, Economy and Society

In accordance with the September 1997 report of the State
Statistical Office, the average household monetary income for
urban areas was Tg 63,900, and in rural areas Tg 48,400. The
average household monetary expenditures reached Tg 62,500 in
urban areas, and Tg 48,500 in rural areas.

Household monetary income composition

End of 1996 End of 1997 Description of composition

27.9% 27.6% Wages and salaries
5.9% 7.0% Pensions and allowances
47.2% 47.1% Individual income
19.0% 18.3% Other

Household monetary expenditures composition

End of 1996 End of 1997 Description of composition

45.0% 44.0% Expenditures on food total
42.5% 43.4% Non-food expentures
12.4% 12.5% Expenditures on service
0.1% 0.1% Deposits

Source: Stale Statistical Office report.

l^
i'cuiil liiifiers blik'kecl "t're attrihutetf to iolj actions bv
:
h
si h
C

;jts
;|a
ih nalnteto countn unct;
I oWcittj llliir< tits|ia|i
he time ;iccoui lpill
icrcerili
;:|u
ni

Monguliu Update 1998
Politics, Economy and Society

Exchange Rate

The national currency, the tugrug, stabilized its exchange rate
with foreign currencies in 1998. During the last eight months of
1997, the average monthly fluctuation in the exchange rate
ranged within 0.37 per cent.
Market exchange rate by October 1998: US $1 =Tg 855

End of 1996 End of 1997 June 1997 March 1998 June 1998
693.51 812.20 797.99 817.61 838.63

The Bank of Mongolia posted in June 1998 the following rates for
buying foreign currencies: DM 463.59; JPY 5.90; CHF549.96;
GBP 1393.38 and HKD 108.28.

Monetary and Banking Developments
The Bank of Mongolia maintained a tight monetary policy in
1997, aimed at reducing inflation and stabilizing the currency.
This tight monetary policy continued in 1998. the hallmark of this
policy is the policy of monetary management through reserve
money. The coordination of monetary policy instruments has been
based on factors affecting the economy, including demand and
supply. As a result of these activities, the inflation rate declined
three times in 1997 from 1996. This price stability has been a
significant achievement, which established a strong foundation for
economic growth and an increase in real income.

The Bank of Mongolia reported at the end of May 1998 that the
total money supply had reached Tg 166.4 billion, when at the end
of the previous year it was Tg 170.06 billion. Individual deposits
reached Tg 54.9 billion by the end of 1997, and Tg 52.3 billion by
June 1998. Interest rates for medium term domestic currency
deposits are fixed between 12 and 42.6 per cent in 1998,andl.2
and 26.8 per cent for foreign currency deposits. In the previous
year it was 6 to 69.6 per cent and 3.7 to 42.6 per cent repectively.

The solvency of the national commercial banks increased two-fold
in 1997. The net international reserve reached in 1997 US $107.15
Politics, Economy and Society

million - a figure twice that of 1996. This was due to gold
reserves surpassing 8,000 kg of pure gold, 48.4 per cent more
than 1996. As of June 1998, the net international reserve is US
$69.17 million. Outstanding loans stood at Tg 50.3 billion at the
end of 1997, marking a 22.2 per cent decrease against 1996. It
was Tg 74 billion as of June 1998.

The Debt Collection Service collected Tg 5.4 billion in 1997, and
plans to bring back another Tg 5 billion this year.

In conformity with its 1998 work plan, the Bank of Mongolia
desires to keep inflation no higher than 20 per cent; increases in
money supply no lower than 25 per cent; and net foreign currency
reserves to reach US $80 million.

In the framework of the government's monetary policy, the
following will be done this year: bank restructuring, increasing
bank solvency and current capital, restoring inter-bank mutual
trust and monetary market operation, defending consumer rights,
maintaining competition as well as implementing bank
privatization.

A Value Added Tax was introduced as of July 1, and then raised
from 10 to 13 per cent. The new tax is to meet International
Monetary Fund conditions. The Consumers' Rights Association
said costs are rising because of the VAT. They pointed to the 30
per cent hike in domestic airfares, petrol hikes and a 20 per cent
increase for milk products.

Foreign Aid and Investment

The October 1997 Tokyo International Donor Meeting saw
pledges of US $250 million in loans and grants being made - an
amount equal to the state budget revenue of Mongolia. Most of
the donors contribute to infrastructure development, namely
highways and transportation, power stations and communication.

Since 1991, loans to the Mongolian Government reached US $560
million, most being long-term, low interest loans. In 1997, foreign
grants reached Tg 6.3 billion.

Mongolia Update 1998
Pol/tics, Economy and Society

It was revealed by (lie government that only five per cent of
foreign aid is spent on the social sector. Of US $180 million in aid
slated for 1998,30 per cent will go to mining, 27 percent to
energy, 19 per cent to transport, eight per cent to
communications, five per cent to social security and three per
cent to other areas.

Japan continued to hold its status as Mongolia's largest bilateral
donor. A record US $20 million was pledged for 1998. USAID is
spending US $2.2 million on diesel power generators to non-grid
power stations in five aimags.

R ec on s t r u£ti oh B a n k/G o 1 o ni t Ban R M e rge r
At tlit t>e^iriningof;ilurie:;|998v35 bill elated to be approved before a
Ojj]>osi tion jVTP«i hegitii 1 iMvycot fjp "~
"'''''|||§|||||^^^||§^S^|p!
'''''illlliiiiS-ninnfJi- iiiiiiiiiii^iiii : ;
^Sgoltyiii: :Thc: erivls iieVpeheii^vlscn'a I;
:;Bank:;witlrtiie jnai(u-itv<ifan::ai!-iiurtv;t;aslv;r
niicd the mm;S:'iia?inij)ro{H'i:
f i$|f
|j^|^|^;^||||i^^^i^^i^|l^l;;^rjli| if the
Finance
: nioyfe iissncfessa •the;§t^|Igh||iirarand ciidl ari;earl\
Recansit«iCti<Hi Ba
wtth 70 jier cent of
(114) ti iintiMJj)l^;:the
i nJ<| and;; retu rii; the
The (>|jjK»N cttoril|;|iip|o::-:|liate
i||||'|§ii|p The resolution "added
g<)vet'nnici i rcM, neither pliicating
its' doom :'b tJon nor salving the
Slft.5 iis. In fact tl>e movewas
by the opposition': ns
Be fJMX; ratio Piirty.
uenjary
T lie? result was ;
pjirahseiiforallofJ f(ii-; antl iiiiii
induding:;trie;;torei
Politics, Economy and Society

The German Reconstruction Bank extended to Mongolia a soft
loan of DM 15 million to overhaul the power station in
Choibalson, Dornod aimag. In June the Foreign Credit and Aid
Coordinating Unit was replaced by the Foreign Investment, Credit
and Aid Coordinating Unit based at the Foreign Relations
Ministry.

Under an Asian Development Bank project, the French firm
Alcatel is replacing 150 kilometres of telephone cable in
Ulaanbaatar, Darhan and Erdenet. It says 50,000 new customers
will be hooked up to the phone system as a result of the US $21
million scheme.

Mongolia spent US $108.9 million in loans and grants from donors
in 1998 as of November, of more than US $205 million commit-
ted. The Government established the Foreign Investment and Loan
Coordination Council in an attempt to streamline the use of
incoming foreign funds.

Fiscal Situation
Total state budget revenues for 1997 were Tg 207.5 billion
(excluding grants), of which 5.1 per cent was the current revenue;
83.8 per cent or Tg 165.5 billion and 16.2 per cent or Tg 31.8
billion were tax and non-tax revenue repectively. The total budget
expenditures reached Tg 298.5 billion (excluding net lending), of
which 65.9 per cent were current expenditures, and 34.1 per cent
were capital expenditure. The total budget deficit stood at Tg
90.9 billion. The State Property Committee contributed Tg 13.4
billion to the state budget, and grants Tg 6.1 billion.

For 1998, state budget revenues are projected to reach Tg 214.9
billion and expenditures Tg 293.9 billion, with the deficit standing
at Tg 79 billion. Budget revenues are to be derived from tax
incomeofTg 143.8 billion, non-tax income of Tg 45.9 billion,
privatization income of Tg 16 billion, and foreign loans and grants
ofTg9.1 billion.

According to state budget projections for 1998, the highest subsidy

Mongolia Update 1998
Politics, Economy and Society

to a local budget will be given to Gobi-Altai, at Tg 2.3 billion,
and the lowest is Gobi-Sumber , with Tg 609 million.

As of June 1998, total revenuse and grants reached Tg 102.3
billion for the general government budget, of which Tg 77.3
billion went to the central governmental, and Tg 26.8 billion to
local government budgets.

Foreign-currency reserves shrunk by a quarter since the beginning
of 1998. Mongol Bank figures set the reserves at the end of the
first half of 1998 at US $75.7 million, $15.7 million more than a
year ago. But the fund is down from a high of US $ 100 million at
the beginning of the year. Due to drops in world prices for
cashmere and copper, the government has been forced to sell off
large chunks of foreign currency to keep the tugrug stable.

Industrial and Real Sector Developments

Despite modest gains in 1996/97, industrial productivity in 1998
was 46.1 percent lower than in 1989, according to the Ministry of
Agriculture and Industry. Coal production was down 38.5 percent,
cement 40.4 per cent, glass and chinaware 96.6 per cent, building
materials 53 per cent, leather goods 97 per cent and sheepskin
goods98 percent.

Construction Sector

In 1997, 820 housing apartments worth Tg 7.2 billion were built.
Construction and capital repair worth Tg 44.4 billion was done by
domestic and foreign companies, a Tg 5 billion increase in money
being spent, but a five per cent decrease in construction work being
completed against 1996.

As of June 1998, construction and capital repair worth Tg 17.2 billion
was done. Total construction work performance is impeded by poor
investment in upgrading skills and equipment.
Politics, Economy and Society

Gross Industrial Production

The State Statistical Office reported that in 1997 the industrial sec-
tor employed 62,000 persons, \\ith gross industrial output reaching
Tg454.7 billion-a growth of 4.4 per cent or Tg 9 billion against
1996. GDP increased by 3.3 per cent against 1996.
Total output broke down as follows: 58 per cent produced by min-
ing of metal ores, quarrying stone, coal and other mining sector;
17.3 per cent by electricity, thermal energy generation; 13 per cent
by manufacturing of food products and beverages; and the remain-
ing parts by other sectors. Production in coal mining, textile sector,
clothing, wood, skin and hide processing declined in 1997.

As of June 1998, gross industrial output reached Tg 210.8 billion or
33 per cent of output reached by June 1997.

Minim;

Mongolian mines delivered 8,902 kilograms of gold to the central
bank in 1997 - 2,905 kg more than in 1996.

In May, the Sharyn Gol coal mine - 240 kilometres north of
Ulaanbaatar - stopped production for eight days because it could
not afford to buy supplies, carry out repairs or pay its workers.
Sharyn Gol, which produces a million tonnes of coal a year, is the
major supplier to the mammoth Erdenet mining enterprise, power
stations in Darkhan and Erdenet cities and Ulaanbaatar's Power
Station #3. The mine is owed more than Tg 6 billion (US $7.5
million) by its customers.

In July, Australia's BHT company claimed it had discovered a
copper deposit in Dungov aimag larger than the deposit at the
Erdenet mine.

Service Sector Development

Though statistics are difficult to find, there has been a substantial
increase in the service sector, most of it in the capital, Ulaanbaatar..
1998 \\ill be remembered as the year of renovations and conversions.

Mongolia Update 1998
Politics, Economy and Society

Many ground floor apartments and older buildings were spruced
up to take on a new life as a shop, restaurant or bar. The range and
quality of goods available has also substantially increased. The
capital now boasts restaurants selling French, Italian. Indian,
Senagalese and American cuisine. Macroeconomic insentives to
start businesses are now beginning to pay off. The capital has taken
a different hue, buzzing with activity. Outside the capital this ser-
vice sector revolution hasn't taken off. Mongolians are saying
"Everything is available for those who can afford it."

Foreign Trade Developments

According to a 1997 report by the SSO, total external turnover
equaled US $1.026 billion, of which exports were worth US $
451.5 million and imports US $574.7 million. The trade deficit
stood at US $123.2 million, a US $96.6 million or 14.7 percent
increase against 1996. Imports increased by 21 percent or US $
123.8 billion.

The decrease of exports was caused by an overall tall in export
products, with copper concentrate dropping by 2.7 per cent,
flourite spar concentrate by 3.6 per cent, goat processed cashmere
by 15.2 per cent and non-processed cashmere by 8.3 per cent.

As of June 1998, total turnover equaled US $371.6 million,
including exports of US $140.9 million, and imports of US $230.7
million. The deficit stood at US $89.8 million. Main export
markets were Switzerland, China, the Russian Federation, South
Korea, USA, Great Britain, Japan, Italy and Germany. In the
first five months of 1998, the SSO found that while imports
continued to increase, the prices for basic goods were also rising.
From January 1 to June 1 of 1998, Mongolia racked up US
$186.2 million in exports, against US $1 14.3 million in imports.
That's US $40.3 million less in exports and US $59.9 million
more in imports than in the same period last year. Prices for
basic consumer goods rose by 12.2 per cent between December
1997 and June 1998. The production of 88 made-m-Mongolia
products increased over 1997. Production of 58 items declined and
Politics, Economy and Society

10 items previously produced in the country - including matches
and batteries - are now to be imported.

The number of foreign joint ventures and wholly owned companies
registered in Mongolia now stands at 820.

The head of the Ulaanbaatar Trade Union, Mr. D. Jadambaa,
charged in May that too many foreign joint-venture businesses
were exploiting Mongolian workers. The Union made an audit of

. ^
': g* \ '-^M'' V- ' V. -

D i recto il

;?|eiv^|a>v"uplieia;Sl;:::Hi;i;a;|i^
|$|MiV:^
x copper miue :1 t^^B rc\^Mc<iyu; ;pj^| ; vi ol a t e(i :•:
:;:h;!idftu^iaiKitii||axes to the tufie^f;
t ci
||||[|||;as of March I998;:accordStig

| |
l
i||
!l!

d Wfihtfictjiatifc' 1 This

|||dc
cvntoflf
||ias;;beeu heading the :R|l|i||
si!9|i| His fon r-y ear-'ifeWt-ip^f;
|i|||i||||(J as yf Februitr* 26, and w as
JMhiy 26 as a resnll of
||ll«i;;joint Russian- as acting ;:
|M|||nliaiibDanl <vf directors. replacing Sh,
the key ivvues remain
and the future of ; thc : nvittpl
e for uncertain, :, 1 '^liiilPill
t.aa

Mongolia Update 1998
Politics, Economy and Society

27 joint-venture companies for compliance with Mongolia's
labour laws and safety and sanitation regulations. They claimed to
have found 25 infractions of the rules and fined one business Tg
40,000. Jadambaa, however, praised foreign investment and said
the government should work together with unions to make sure
standards are upheld.
Agriculture

Livestock

The State Statistical Office reported that, out of 31.3 million
heads of livestock registered in 1997, there were 14.1 million
sheep, 10.2 million goats, 3.6 million cows, 2.9 million horses
and 355,400 camels.

Since 1990 livestock increased by 20.9 per cent or 5.4 million
heads, in which 5.1 million or 94.9 per cent of the growth is
attributed to goats. This is due to increasing interest among
herders in producing cashmere for export, despite falling prices.

Statistics for June 1998 show that 80 per cent of 10.4 million
breeding stock gave birth, and 9.7 million heads of new-boms
survived. Natural losses of adult animals as of June 1998 totalled
2 per cent of total livestock or 6.1 million. The figure for 1997
was 1.5 per cent or 4.5 million.

In July the British ATL company signed a US $2 million meat-
processing agreement with Mongolia's Nomgon Bar company, to
process and market Mongolia's pure, eco-friendly meat using a
system of vacuum sealing and refrigerated transportation.

Crops

Green Revolution
The Ministry of Agriculture blamed financial and technical
problems for delaying the crop harvest in 1998. Only half of the
country's grain- and potatoe-harvesting exquipment has undergone
repairs this year. Problems with the Golomt and Reconstruction
banks has meant farmers are unable to get loans for much-needed
Politics, Economy and Society

fuel and parts.

In 1998, the total area sown reached 323,150.9 hectares - 98.3 per
cent of 1997's area. Potatoes and vegetables sawn this year
increased by 122.3 per cent and 146.5 per cent respectively
against 1997.
The government's Green Reovolution is said to have involved
70,000 families and 920 businesses planting 10,000 hectares of
fruits and vegetables.

Due to a shortage of domestic flour production, 11,000 tonnes of
wheat were donated by the US Government to Mongolia at the
end of 1997.

Mongolia spends US $40 million a year to import vegetables.
In August 1998 the US government announced it \».as going to
donate 24 tonnes of wheat valued at US $5 million to Mongolia.
Mongolia will ship US S6 million worth of meat and fluorspar to
Russia in 1998. as payment tor outstanding debts to its northern
neighbour.

Privatization

The State Property Committee called 1997 a huge success in
Mongolia's ongoing efforts to privatize business. Some 212
economic entities, including 97 state companies, were sold during
the first phase of a three-year privatization programme, contribut-
ing Tg 13.4 billion to the state budget. These included 20,267
apartments. Sales of small- and medium-sized business was most
effective.

The Committee sold 14 crop-farming enterprises at an open bid in
1997. Privatization of the remaining 40 enterprises on the list is
planned for this year.

The Property Privatization Board transferred Tg 6.7 billion to the
central government budget, and Tg 444.3 million to the local
government budget as of June 30, 1998. Thirty-seven auctions

Mongolia Update 19'J8
Politics, Economy and Society

were organized in Ulaanbaatar, in which six properties, 29
economic entities, three limited companies were sold. One third,
or 25,000 apartments out of a total 75,000, were privatized.

Local privatizations brought in by June 1998 Tg 787.9 million to
the state budget.
In the area of land privatization, the government has promised it
only affect 0.6 per cent of the country. Pasture land, Special
Protected Areas and land regarded as public property would be
exempt from privatization.

By May 1998 the Government admitted privatization was going
slowly. As of that date, only 390 of 1,114 entities slated for
privatization since 1996 have been sold off. Privatization of the
largest businesses began in March 1998, but most of the larger
entities - including the state airline MIAT and Gobi Cashmere -
remain in government hands. High price tags and operating costs
deter would-be buyers. Both the high-rise Ardyn Bank building and
the State Department Store have tailed to shift despite repeated
attempts at auction.

By September 1998, 50,000 families became homeowners since
housing privatization was introduced in 1997.

Social Issues
Unemployment
Official statistics registered 63,600 unemployed people at the
labor exchange at the end of 1997, and 55,800 as of June 1998.
The unemployment rate totaled 7.6 per cent at the end of 1997,
with 25.5 per cent or the highest unemployment in Dornod aimag

The number of unemployed entering the workforce is 10,800 as of
June 1998. The number of unemployed newly registered in the
first six months of 1998 decreased by 12,003 from 21,673 in 1997.
The Ministry of Health's Labour Coordinating Office estmated
that more than 200,000 people - 20 per cent of the working-age
population - do not have formal jobs. The number of Mongolians
officially registered as unemployed as of June stands at 62,200.
Politics, Economy and Society

Nearly two-thirds of the officially unemployed have no profes-
sional training.

Women account for 48 per cent of Mongolian workers, or 363,831
of the country's 756,043 working people. But they make up 51 per
cent of the registered unemployed, or 31,208 of 61, 504.
Poverty

Official statistics at the end of 1997 showed the number of poor in
thecountry had reached 587,741, comprising 149,647 households.
The poverty level is 24.6 percent of the population. 142,300 poor
or26,189 households live in Ulaanbaatar, while56,328 poor- the
highest number outside of Ulaanbaatar-live in Huvsgul aimag.
40.6 per cent of the poor are neither employed nor in school; 23.6
per cent are single-mother parents. The number of single-mother
households in the country reached 51,700, showing a 12.4 per cent
increase against 1996. Out of the poor population, 46.6 per cent
are children under 16, 45.8 per cent are working age, and 7.6 per
cent are elderly.

The minimum subsistence level (MSL) has not been revised since
February 1997.

The number of Mongolians leaving the countryside for
Ulaanbaatar in search of economic opportunities is increasing. In
the first half of 1998, 6,518 people - most of them between the
ages of 18 and 39 - resettled in the capital. That's 60 per cent
more than in the same period last year. Faced with overloaded
social services and rising unemployment, the Ulaanbaatar
government is keen to curb this mushrooming of the city's

Mongolia Update 1998
Partnership for Progress Update

Four

population. Official figures say the capital is home to 640,000
people, but unofficial estimates go as high as 1 million. It costs
Tg 26,000 (US $32) to register as an Ulaanbaatar citizen and
receive social benefits.

T he United Nations Development Programme has been
a supporter of Mongolia's development efforts since the
1970s. A new five-year programme (1997 to 2001) called the
Partnership for Progress, is into its second year. These UNDP
activities support the Mongolian Government's Programme of
Action (November, 1996), with its priority on economic growth
under difficult transition conditions.

This year has seen a number of landmark activities. The United
Nations as a system has signed with the Mongolian Government a
Memorandum of Understanding on youth issues. Two more MOUs
are due to be signed on Food Security and Nutrition and Human
Rights. At UNDP, the priority has been to assist the Mongolian
Government in the development of a relevant social policy to meet
the challenges of free markets and democracy. This has entailed
close consultation with the government, most particularly in the
frequent visits of a Japanese specialist on human development.
Work is under way on the 1999 Mongolian Human Development
Report (the first was published in 1997). The Government has
chosen the theme "Human Development and Government
Services" for this report.
Partnership for Progress Update

Human Development
Microcredit experience in Mongolia
UNDP is spending US $ 1 million to kick off the microfinance
experience in Mongolia for the first time. The project, signed in
June 1997, is underway with the executing agency ACDI/VOCA, a
US microfinance consulting firm.

Main outputs of the project include a national microfmance
institution (MFI) providing technical service to other MFIs and
loans; at least five local professional MFIs; 7,500 loans being
disbursed; and a target of 50 percent women beneficiaries by the
end of the project.

Support to formulation of social policy in Mongolia
Last year the Mongolian Government took decisive steps in the
reform process in governance and macroeconomy. UNDP
Mongolia is working to assist the government in identifying viable
social policy options to balance these economic reforms. A
preparatory report has been prepared by Professor Ryokichi
Hirono, a well-known Japanese economist. UNDP Mongolia is
leading an effort with the Government, UNICEF and Save the
Children Fund (UK) to identify options for the development of a
new national social policy framework. The policy options uphold
sustainable human development paradigms and are consistent with
the nation's ongoing political and economic reforms. The inputs
from UNDP and UNICEF on this review of social policy options
support national and international consultants, various workshops
and training.

The review exercise will be conducted in two phases,
incorporating social policy options and a national social policy
framework. It is foreseen that the recommendations will be
finalized in September 1998.

The issue was also broadly discussed at the 51U forum of the
Economic Club (under UNDP's Economic and Social Growth
Think Tank Project).

Mongolia U p d a t e
Partnership for Progress Update

Helping to renovate the wheat seed pool in Mongolia for
sustainable food security
UNDP's Emergency Production of High Quality Wheat Seed and
New Variety Testing Project has allocated US $100,000 for the
purchase of high quality wheat seed from Kazakhstan. The present
wheat seed pool in Mongolia is at six to seven generations,
consequently, the productive quality is low. For the purpose of
rejuvenating the seed pool, about 200 tonnes of high quality wheat
seed were imported. The seed was distributed to 11 private sector
cereal farms for multiplication purposes under the supervision of
a local consultancy company. In autumn, 400 tonnes of the high
quality seed will be put into the seed revolving fund. This is a
critical initiative to boost food security in line with the priorities
and market reforms of Mongolia.

Support to Mongolia's 1998 Green Revolution
With the help of UNDP's funds, 10,000 households in Ulaanbaatar
City were provided with instruction booklets on how to grow fruits
and vegetables. In connection with the national Green Revolution
programme of the Mongolian Government, UNDP is spending US
$20,000 from its seed project to help purchase vegetable and fruit
seeds and seedlings. In order to ensure the successful delivery of
the support, the Poverty Alleviation Study Centre, an emerging
national NGO, has been contracted for the job.

Support to formulation of water and sanitation policy in
Mongolia
Under UNDP's WASH-21 project (National Water Sanitation and
Hygiene Education for the 21s1 Century), a study to tour to India
took place in the framework of water and sanitation policy review
and formulation. The tour focused on water and sanitation policy
and management issues, with cost-sharing by UNDP and SIDA.
As well, a full-scale policy formulation workshop will take place
at the beginning of July, and the first draft of the policy will be
presented to the Government of Mongolia in September 1998.

Environment and Natural Resource Management
MAP-21 For the21- century is adopted
Partnership for Progress Update

As the follow-up to Mongolia's commitment to the Rio de Janeiro
Agenda-21, the Mongolian Action Programme for the 21st century
(MAP-21) was launched at a national summit. The National
Sustainable Development Action Programme incorporates the
Sustainable Development Action Programmes of the 21 provinces.
During the Summit, the 40-page executive summary was launched
in both English and Mongolian. The summary lays out the national
development strategy and how the Government and civil society
can work together. Mongolia's Business Council for Sustainable
Development was established to support among other things M AP-
21. The Council will be promoting the benefits of sustainable
development to the private sector.

Support to biodiversity conservation
The fragile steppe grasslands of Eastern Mongolia, considered a
global treasure, will become a protected area under a new seven-
year, UNDP project signed with the Government of Mongolia.
The over US $6 million project, "Biodiversity Conservation and
Sustainable Livelihood Options in the Grasslands of Eastern
Mongolia", is intended to prevent the unsustainable exploitation
of the animals, plants and ecosystems of an area that is being
targetted for oil exploration and mining. This innovative project
will involve local people as environmental custodians, weaving
the goals of environmental protection into sustainable livelihoods.
Local governments in three provinces will receive support to
incorporate biodiversity into local planning. Any profits from
economic activities in the buffer zones will be plowed back into a
Community Fund to be used by citizens. The Mongolian govern-
ment hopes to increase the amount of territory under protection
from 11.6 per cent to 15 per cent by the year 2000.

UNDP is working in partnership with the US Peace Corps, three
Mongolian ecotourism companies and the governments of Finland
and the Netherlands.The signing of the project was part of
celebration of the World Environment Day on 5 June 1998.

UNDP documents biodiversity of Mongolia

Mongolia Update 1998
Partnership for Progress Update

The first national report on biodiversity in Mongolia was
published in June. The report gives a broad description of the
socio-economic development trends, environmental status,
climate, flora and fauna of Mongolia and details government
action so far, including the current status of protection, use and
restoration.

Governance and Economic Transition
Support to the private sector
UNDP has signed with the Government of Mongolia a US $2.6
million project to smooth the transition to a market economy. The
project will provide national and international technical assis-
tance to 10 newly privatised companies. These companies will be
selected based on detailed criteria related to economic, social and
environmental concerns. The project is intended to create a more
dynamic private sector in Mongolia by reforming the operations of
firms, introducing modern management techniques, developing
models and methodologies for future enterprise reform and
training staff. Despite the rapid introduction of market reforms,
many private enterprises suffer from inexperience with the
market economy. The end result is that these inefficiencies
continue to contribute to low production and high unemployment;
two consequences of transition that the project hopes to remedy.
Funds for the "Enterprise Restructuring" project are being
generously provided on a cost-sharing basis from the Government
of the Netherlands.

Support to the national Information Technology seminar
UNDP Mongolia together with Asia-Pacific Development
Information Programme (APDIP), held its first Information and
Technology (IT) Seminar on the Internet in Kuala Lumpur.
Tailored to the needs of the Mongolian Government delegation,
the seminar was part of the preparation activities to the National
IT summit that will take place this summer. Ministerial and
private sector representatives, who are part of a working group to
advise the Government on assessment, policies and
implementation of IT strategy, participated in the seminar.

DL
Partnership for Progress Update

Greater access for Mongolians to the Internet
The APDIP contributed US $ 12,000 to UNDP Mongolia
to be spent on establishing the fifth Citizen's Information
Service Center (CISC) in Dundgovi aimag (province) and
to support the UN Information Shop's Internet connection
for the public. CISCs offer access to the Internet and E-
mail while also providing courses on computer software.
UNDP has supported the use of the Internet to help give
Mongolians access to their government's laws and the
large amount of information produced by the central
government in the capital.

Workshop high lights accomplishments in IT
A homepage competition capped a two-day workshop in
May on maximizing the opportunities of IT. UNDP's
Information, Communication and Technology for Sustain-
able Human Development Project has hooked up 20
government ministries to an Intranet and the Internet.
There was also a homepage design workshop for more than
150 organizations. The number of Mongolian homepages
has surpassed 70 and more come on-line every week.

The first Mongolian economics magazine
UNDP Mongolia's Economic and Social Growth Think
Tank Project has initiated the first magazine to focus on
economic developments in the country. Named "Develop-
ment Economics", the quarterly magazine probes further
into the challenges of a transition to a market economy.

Support to the development of new journalism in
Mongolia
Under the Support to Democracy through Strengthening
Journalism Project, training was provided for regional
journalists on surviving in the market economy. The thirty
plus workshops of the project aim to change the concept of
journalism in Mongolia, switching from journalism
controlled by the state to a free press in a proper democ-
racy. To assist the Parliament's debate over a new media
law, UNDP sponsored an opinion survey of journalists and
politicians.

Mongolia Update 1998
Partnership for Progress Update

HIV/AIDS/STDs
Public awareness activities
The discovery of two new HIV-positive cases at the end of 1997
led to a national crisis driven by media hysteria. This increased
the number of known Mongolians infected with HIV from one to
two. In 1998, UNDP Mongolia's HIV/AIDS/STD team has been
busy working with NGOs wishing to be involved in prevention
andwareness-raising activities. Students were encouraged to
amalgamate and form a student's AIDS Club, which was launched
at local disco, Top Ten. The UN-funded Mongolian AIDS Bulletin
was distributed and a game was played with patrons of the disco.
Short dramatic scenes showing how HIV is transmitted was
performed by troupe of actors. As well, the training needs of the
homosexual community were ascertained.a

AIDS Foundation established
At the launch of the National AIDS Foundation several private
sector companies and NGOs pledged money for the Foundation. A
total of about US $4,500 was raised, through a combination of
cash pledges and in-kind (condoms) donations from organizations
such as the Mongolian Red Cross Society, the Olympics
Committee, Mongolian Consulting Services, etc. The most
impressive donation was made by Erdenet miners, who pledged a
day's salary.

Support to raising public awareness on the prevention of HIV/
AIT>S/STDs
Eleven NGOs are being contracted to work closely with the
segments of society who are vulnerable to HIV/AIDS and STD
infection. The UNDP component of the UNAIDS programme is
funding these small projects to carry out prevention education
among target groups. The target groups include commercial sex
workers and their customers, businessmen, students, street and
homeless children, homosexuals, military officers and prisoners.
The projects will be aiming mainly at educating the educators.
Formulation of the national IEC strategy
UNICEF, UNDP's HIV/AIDS team, other UN agencies and
some women's NGOs have drafted the Terms of Reference for the
Partnership for Progress Update

working group to formulate the National Information, Education
and Communication strategy forHIV/AIDS/STD for the coming
two years. The working group has started to implement the

EBL Mongolia Update 1998